"Austerity" the New Big Lie

In G-20 Moves Toward Deficit-Tackling Targets, With Flexibility, Bloomberg.com perpetuates the lie that the giant continued deficits of numerous countries have anything to do with belt-tightening. From the article:

“It is draconian, a little difficult, a little exaggerated,” said Brazilian Finance Minister Guido Mantega. “Some countries would not be able to do it. It is clear that a cut is needed, but at what velocity? It can’t be too fast.”

The officials said the G-20 statement today will echo an agreement reached by finance chiefs in Busan, South Korea, earlier this month.

The agreement would effectively endorse the austerity plan set out by the U.K., . . .

Here is the Financial Times going along with the Big Lie in Osborne gambles on pain to survive the pain:

Where does all this austerity leave Britain compared with other countries? If the establishment is right and the economy recovers smartly, Britain is now projected to enjoy less than half the level of borrowing in 2014-15 of other advanced economies in the Group of 20.

Its accumulated gross debt would also be lower. The International Monetary Fund recently estimated that advanced G20 countries would hit 2015 with gross public debt rising to almost 120 per cent of national income. The equivalent figures in the Budget show Britain’s gross debt burden peaking at 86 per cent in 2012-13 and then falling well below the G20 average.

This austerity plan projected large national deficits year after year, only falling to 2% of GDP 5-6 years from now.

None of this has anything to do with austerity. The IMF has frequently imposed real austerity on countries. This involves running governmental surpluses. All that is being talked about here is that unprecedented peacetime deficits will be run next year, the only larger peacetime deficit being run currently.

There is no secret as to the incessant media use and acceptance of the politicians promotion that these policies are austere. It is of a piece of the even more damaging Big Lie coming out of the financial crisis that the governments were forced to run these big deficits to save the system or save the economy. Of course, the bailouts were in essence transfers of wealth from society at large to stakeholders of (mostly giant) financial institutions: employees, stockholders and bondholders.

The non-governmental beneficiaries, namely Big Finance and its acolytes, continue to benefit from deficits. Larger deficits mean more business selling and repackaging government debt, with the important side benefit that much of said debt goes to supporting existing debt that can then be traded. More complexity means more experts to analyze said complexity, and so on.

And then when Greece or Spain gets in trouble, that means yet more business for Team Finance.

Sometimes debt is necessary. Examples would be a war for national survival or major capital spending to create durable future benefits, such as a major dam or bridge. Examples where debt is the wrong approach involve spending for predictable long-term social situations such as an aging population. It's fine if society agrees to expend more effort on the health of retirees. Because there is a negative multiplier effect from such effort, this effort simply should be paid for out of current income (or liquidation of accumulated assets if that is really desired), but for highly indebted countries such as the U. S. and the U. K. to continue to borrow for social benefits has nothing to do with austerity.

We are in a Wonderland world where words mean what the Big Finance/governmental alliance mean whatever they want them to mean.

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